The Minister in Norway ( Philip ) to the Secretary of State
[Received November 7.]
Sir: I have the honor to advert to the Department’s cable instruction No. 12 of July 19, 6 p.m., and to my despatch No. 509 of August 11th [Page 656] last,22 concerning the proposed negotiations for a reciprocal tariff with Norway.
I have postponed the completion of this comprehensive report in the hope that it might be possible to procure information of a more definite nature for the use of the Department’s special committee than has been available to me.
Generally speaking my efforts in this direction have had a rather negative result. The members of the Norwegian Government who have been approached have been distinctly noncommittal in regard to Norwegian expectations as a result of the pending negotiations. An exception to this reticence may be noted in respect to the exportation of whale oil to the United States. On a number of occasions complaints have been voiced concerning our high duty on this commodity and the important bearing of the American market upon the future of this Norwegian industry.
The general impression I have gained here as to the prospect for a valuable reciprocal tariff adjustment with Norway has not been very satisfactory.
The European scramble for trade concessions by means of tariff bartering, enforced clearings, etc., now seems to have passed its most productive phase and in so far as Scandinavia is concerned, to have entered into that of squeezing out such trade assets and openings as may still remain disengaged.
The balance of trade between Norway and France, for instance, like that with the United States, is in favor of the smaller country. The result of this situation has led to the bartering by Norway of its free purchasing power under threat of exclusion by tariff restrictions from a market upon which it depends. In other words, Western Europe and Scandinavia would appear to be already pretty well tied up in a network of protective tariffs and resulting special trade agreements, which renders it problematical whether any extensive scope exists for the United States to achieve very advantageous tariff adjustments with these small countries in consequence.
Norway has been much engrossed in these European trade activities.
Forced clearing agreements have been concluded by Norway of late with Germany, Greece and Turkey. Secret trade agreements have been negotiated with France and Spain. The commercial treaty with Portugal has been amplified by an additional article23 which guarantees a definite consumption of codfish and shipping advantages to Norway in return for import rights for a specified quantity of heavy wines to Portugal.
In my talks with Foreign Office officials they have alluded to these various international negotiations as having a more or less exclusive [Page 657] bearing on fish and wines only. And in the majority of instances this probably is the case.
With regard to the forced clearing agreement with Germany, Norway’s stock on hand of whale oil, valued approximately at $7,500,000, is said to have been the medium of exchange as against prospective importations of German commodities of equal value.
It has been reported that Norway has, so far, been unable to arrive at an agreement this year with Soviet Russia for the disposal of its dried fish products under a forced clearing arrangement. This fact may have rendered the necessity for providing additional markets an urgent one.
It would seem probable that the agreement with Spain may chiefly involve an exchange of fish and wines, but this has not been made public here.
Similarly, the details of the trade agreement with France are not available. It is known that the French Government, during the past two years, has displayed a very insistent attitude in the matter of increased Norwegian consumption of French products on the ground that the balance of trade between the two countries is much in Norway’s favor. I have been told by Norwegian officials that, as a result of this insistence, their Government has agreed to import increased stocks of French Cognac. The Legation, on several occasions during the period mentioned, has been called upon to make representations in regard to the tendency of the Norwegian Government to discriminate against American automobiles and motor trucks in favor of those of French manufacture. These difficulties have arisen in connection with public calls for bids by various governmental departments. The Legation has been reliably informed in certain instances that, in spite of lower bids having been handed in by the representatives of American companies, pressure had been brought to bear upon the departments concerned by the Foreign Office with a view to causing them to award the contracts to a French bidder.
Our Consul General in Oslo appears to be of the opinion that the Norwegian-French trade agreement embodies some special provision for the importation of French motor vehicles (Citröen), and that the existing restriction against the importation of motor vehicles may have been imposed by the Norwegian Government as a means of controlling this trade and of opening the market to motor vehicles from France and Italy without direct competition with those from the United States. Any such arrangement would doubtless be at the expense of the medium-priced American automobile, for which the popular demand is very great here and which under present conditions cannot be equaled as regards price and quality by those of European manufacture.[Page 658]
In connection with the subject of Norway’s trade commitments, I will mention that Japan has made strong representations here regarding the tendency to disregard Japanese imports. Japanese representatives have drawn attention to the trade balance in favor of Norway as indicated by the heavy foreign tonnage carried to Japan in Norwegian steamships. At the same time, the development of paper and rubber manufacturing in this country has elicited comment in that quarter.
Finally, no general consideration of the subject of reciprocal tariff negotiations with Norway can be undertaken without a realization of the strong international trade affiliations existing between that country and Great Britain.
In the course of a short visit to Oslo, Mr. Anthony Eden, Lord Privy Seal of the British Government, is reported to have spoken in the following terms on the 20th instant: “The two countries have many interests in common; their trade with each other has shown a satisfactory development of late. The ties binding the two nations are not merely of an industrial nature. Both peoples have a parliamentary government, both are democratic, both are members of the League of Nations, their Royal families are closely related; all these factors must contribute to maintain a true friendship and understanding. In these days when relations between nations are not so smooth we must be glad to speak of such a deep and serious friendship between two nations as that between Norway and Great Britain.”
Under the circumstances above mentioned it is impossible for me to conjecture what may be the extent of Norway’s liberty of action, or free purchasing power, and what advantages it would be in a position to offer in return for favorable tariff adjustments on our part.
Were it possible for our Government to propose simultaneous reciprocal tariff negotiations with all four of the Scandinavian Governments, this would seem to me a wise departure. By such means we might be in a position to accord to the reciprocal tariff movement a more extensive range than through the negotiation of separate agreements. At the same time, such a step might serve to open the way to a closer understanding and cooperation with the Scandinavian bloc, both as regards a realization of the President’s desires for basic international exchange of commodities and to other questions of international moment.
In reverting to the particular subject of this report, I may state that the popular trend in Norway is essentially nationalistic. The chief aim at present of those directing the commercial policies of this country seems to be to render it self-supporting and independent of outside necessities.[Page 659]
Possessed of an abnormally large merchant fleet, Norway derives extensive benefits, through its private shipping companies, as a carrier of other nations’ goods.
At home, everything possible is being done to supplant foreign products by those of domestic origin. For the rest, Norway is dependent upon foreign markets for the sale of the surplus products of its fisheries, its forests and, to some extent, of its mines.
I would have the Department’s committee, then, envision a stout, nationalistic-minded little country with an equable population of frugal, hard-headed folk, temperamentally ready to make great sacrifices for a matter of conceived principle or injustice, but generally amenable to reason in important questions if approached with tact and intelligent consideration.
In its foreign outlook, I should say that Norway attaches the greatest value to its trade relations with Great Britain. The latter undoubtedly enjoys the greatest prestige here of all the foreign nations. The fact that the Queen of Norway is a sister of the King of Great Britain may contribute to this sentiment but, I should say, to no great extent.
Economically, Great Britain might be described as Norway’s model. The business connections and trade understanding of Norway with that country are more intimate than with any other. One of the primary causes for this international confidence is the fact that Great Britain continues to be a regular customer for an important quantity of the Norwegian annual catch of edible fish.
With this exception, Norway does not seem to cultivate any notable international affiliations.
As an indication of the Norwegian attitude toward the importers of foreign goods, I may mention that under Norwegian law no foreign company is permitted to operate in this country. Foreign travelling salesmen are obliged to procure Norwegian trading permits and are prohibited from selling to the retail trade. Armed with such a permit, which is obtained with considerable difficulty, an American salesman may only visit wholesale houses to receive orders for American goods. Under these conditions American trade in Norway is largely in the hands of Norwegian agents.
Many complaints have reached me also regarding the tendency of the Norwegian authorities to make arbitrary rulings with respect to the unfair re-classification of articles of import which subjects these to heavier duties than necessary. One such case that I recall involved the re-classification of “fox food” (an American preparation used in raising valuable foxes). This preparation was arbitrarily placed in the same category as canned human foods which carry a prohibitive [Page 660] duty. Thus, the importation of this article was stopped, presumably to the advantage of domestic competitors.
Further handicaps to the foreign importer are due to restrictions which are seemingly imposed not only for the protection of domestic industries but to enable the Norwegian Government to control and apportion the volume of certain imports and to employ them as assets in its tariff negotiations with Foreign governments. The restrictions alluded to include prohibitions, quota allotments, import licenses, etc.
Some of the restrictions which are now in force are the following:
The importation of—
1) Living, fresh or so-called light salted fish, or of shell fish, excepting live shell fish, is prohibited.
2) Pork and lard is subject to prohibitive duties. (Note. Although these products were imported from the United States in large quantities in post war years, Norway now has developed a domestic supply more than sufficient for the country’s requirements.)
3) Butter is prohibited.
4) Oregon pine plywood is permitted only under special import license for insufficient quantities annually. (Note. This American product is in very great demand in Norway. It cannot justly be said to compete with Norwegian plywood for special work owing to the superiority of the American wood and the excellence of its manufacture).
5) Motor vehicles and chassis of all kinds are prohibited except under import licenses issued by the Norwegian Department of Commerce. (Note. It is apprehended that this, the most valuable article of import from the United States, may ultimately be subjected to the application of the system of quota allotments to the various exporting countries; and that the average for such quota allotments may be drawn from the import statistics for years unfavorable to the United States. In any event the restriction of this trade, whether by the license or the quota systems, will in effect enable the Norwegian Government to allot to competing nations, in return for reciprocal favors, a portion of this trade which in all probability would be assimilated by the United States did the importation of motor vehicles remain open to unrestricted foreign competition).
6) Rubber footwear is subject to quota allotments based on the average of imports during years not wholly favorable to the United States.
(Note. Several representations were made by the Legation to the Norwegian Government, prior to the final decision by the Commercial Committee of the Storting, with a view to having these quota allotments based upon the average statistics of years more favorable to American rubber footwear imports than those chosen. Under the [Page 661] conditions now existing, the matter is not one which greatly affects American interests owing to the ability of Japanese, Czechoslovakian and other exporters to undersell those of the United States.
7) Apples and pears is subject to an excessive duty from August 1, to January 31, which has the effect of reducing the imports of American apples to a minimum during the height of the American apple season.
(Note. The duty on apples and pears amounts to Kr. 0.72 per kilogram from August 1, to January 31, and to Kr. 0.36 per kilogram from February 1, to July 31. As the year 1933 was an exceptional one for fruit in Norway, the period during which the high rates were effective was extended to February 18, by special ruling of the Storting. The Consul General in Oslo remarks that the policy of placing the high duty on apples during the fall and early winter discriminates against the United States in favor of Australia and South Africa, where the fruit seasons vary from those of the United States.
8) Flour is controlled by a Norwegian Government Monopoly.
(Note. This trade has been an important one for the United States for the past thirty or forty years. Owing to the development of Norwegian milling plants and other causes it is considerably diminished, but it is still valuable. The principal flour exporting companies, of which there are but two of outstanding foreign reputation in the United States, complain that the monopolistic regulations prevent them from exporting their flour to Norway under their own trade marks, or “mill brands”. This obligation is regarded in the light of a prejudice to their foreign trade interests. I understand that the companies principally affected hesitate to request our Government to negotiate for a restitution of their right to export under their individual trade marks owing to the apprehension that the Norwegian Government would discontinue their dealings with them and transfer their orders to other producers who would agree to supply flour under the mark of the Norwegian monopoly.)
Referring to the instructions embodied in the last paragraph of the Department’s cable No. 12 above-mentioned, I beg to report as follows:
(a) I should judge that the Norwegian representatives for the proposed negotiations will be in possession of very clear instructions as to the trade advantages desired by their Government. Presumably our own Government would not find it difficult to meet these proposals should adequate return be forthcoming.
Just to what extent the Norwegian Government has been left free by its prior trade commitments with other nations to accord such tariff concessions as we may wish, is largely a matter of conjecture.
For this reason it would be of primary importance to obtain from the Norwegians, if possible, a frank statement as to their Government’s position in this regard.[Page 662]
As a preliminary to the proposed negotiations, it would be of special interest to receive full information respecting the recent trade agreement with France, the provisions of which have not been made public.
In connection with the general subject of tariff adjustments, the Consul General in Oslo draws my attention to the great importance of giving full consideration to the competitive strength of American exporters to Norway and of Norwegian exporters to the United States, as compared with that of their competitors in other exporting countries. He states that: “It would be absurd for the American Government to obtain a tariff reduction in Norway on a commodity for the benefit of American exporters when it would enable manufacturers in other countries, under most-favored-nation treaties, to obtain the major benefit therefrom”.
Such a situation would arise in respect to an American commodity which, due to the greater cost of freight, or of production, could not favorably compete in this market with a similar article of foreign manufacture. A case in point would be that of rubber footwear, alluded to above.
(b) In approaching the subject of commitments, or concessions, to be requested by us from Norway, I beg to call attention to a factor which has a decided bearing upon the shrinkage of our trade with this country.
As a result of the food shortage in Europe in post war years our exports of wheat, pork and other food products showed unusual gains. For instance, in 1925 and 1926, imports from the United States comprised over 14 per cent of the entire import trade of Norway, whereas in the year 1933, this proportion had dropped to 6.9 per cent.
From the year 1929, to 1933, there was a great overproduction of wheat in the world and the abundance of grain in European markets has enabled Norway since then, to purchase its requirements from Russia, Germany, and even from France at lower prices than could be obtained in the United States. Also, under a Government monopoly established some years ago, Norway has greatly increased the domestic milling of flour which has had the effect of reducing the former large imports of that commodity from the United States.
I may add that one of the results of this monopoly is that it is impossible to obtain really fine flour in Norway today.
With regard to the pork products, Norway has practically ceased to import these, owing to the extraordinary increase in domestic production.
Thus, it will be seen that the very sharp decline in our export trade to Norway must be partially attributed to causes which it could not be expected to adjust by means of a reciprocal tariff agreement.[Page 663]
Another important factor affecting this trade of late years has been the exchange situation.
During the latter part of 1931, the whole of 1932, and the first half of 1933, American manufacturers were unable to compete with those in European countries where the gold standard had been abandoned.
Since the depreciation of our dollar, there has been indicated a corresponding demand for American goods, and it is highly probable that the gross percentage of our trade with Norway during the current year will display very important gains.
The balance of trade between the two countries is now considerably in the favor of Norway.
The following American exports to Norway are admitted free of duty and, therefore, do not call for additional remarks here: Grain, petroleum and petroleum products, raw cotton, welded pipes and copper wire.
Among the most important articles of export from the United States to Norway are the following:
(1) Motor vehicles and accessories. (2) Textiles. (3) Tobacco. (4) Packing house products. (5) Fresh and dried fruits. (6) Lumber. (7) Rubber products.
Of all American exports to this country, motor vehicles and accessories constitute the most important group. They are well known to Norwegians and enjoy exceptional popularity in the country. This applies chiefly to medium-priced passenger automobiles and the well known makes of motor trucks.
It does not seem too much to say that, so long as fair and unrestricted competition exists in this market, the American motor vehicle will maintain its supremacy over all others on a basis of quality and price. As an indication that this item of trade was able to maintain its great supremacy in spite of the disadvantages accruing from unfavorable exchange conditions, I may note that the total number of automobiles imported into Norway during the years 1929–1933, inclusive, was 23,843. Of this total 20,601, or 86.4 per cent were of American manufacture.
Similarly, during the first seven months of 1934, American cars showed an average of 84 per cent of the total number imported.
Should this trade remain unrestricted it is more than probable that the percentage of American automobiles imported into Norway will attain, during the current year, the figure of 90 per cent (or even higher) of the total of importations.
The Department has been informed that the Norwegian Government suddenly prohibited the importation of motor vehicles, as from September 5, 1934, except by special import license. Up to the date of this report these licenses have been granted freely.[Page 664]
This step has occasioned much comment here. In some quarters it has been attributed to tactical motives on the part of the Government in view of the prospective tariff negotiations in Washington. But the more general feeling among the importers is one of apprehension that it is but the forerunner of other restrictive measures. The quota principle is what is most feared, especially as there seems to be a general impression that allotments under this system would be based upon averages drawn from statistics for the years 1932, or 1933. These years would be unfavorable to the American automobile in that the gold dollar prices then existing were responsible for a falling off of sales.
A further disadvantage to American automobile manufacturers in the application of the quota principle has been mentioned to me by the European representative of one of these companies. He said, in effect, that whereas the current importations indicate that the share of this trade now in the hands of all non-American manufacturers averages approximately 10 per cent to 15 per cent of the total number imported, under the quota system, he estimates that the foreign competitors would be accorded the right to import approximately 30 per cent, or more—the increase being at the expense of the American exporter.
An interesting feature of the American imports of motor vehicles is that a large proportion of these are shipped into Norway from other countries than the United States. During the first half of 1934, for example, 822 American automobiles were shipped to this country from American assembling plants in Denmark, as compared with 575 direct shipments from the United States. There were also during this period 73 motor cars imported from an American assembling plant in Germany. The Consul General in Oslo remarks, in regard to the possible enforcement of the quota principle, that it will be interesting to know what attitude the Norwegian Government will take in connection with the importation of American automobiles from Denmark, England and Germany. He adds that during the year 1933, there were approximately 1300 second hand American cars imported from Great Britain and, approximately, 300 from Germany, as against direct shipments of only 175 from the United States. Should the Norwegian Government use these statistics as a basis for arriving at quotas, Denmark and Great Britain probably would be alloted larger quotas than the United States.
The Consul General has stated also that he is in receipt of persistent reports to the effect that the French and Italian Legations in Oslo are bringing strong pressure to bear on the Norwegian Government with a view to the allotment of large quotas to the manufacturers of motor vehicles in the respective countries.[Page 665]
The existing duties on passenger automobiles, trucks, motors, automobile accessories and equipment are very high. The internal luxury tax on high-priced passenger automobiles is excessive.
Norwegian officials have stated to me that their Government’s chief aim in imposing these high rates is to limit both popular extravagance and the number of motor vehicles—those now in use being more than the narrow roads of the country can accommodate.
It appears to be the consensus of opinion among the leading representatives of American automobile companies in Oslo that a 50 per cent reduction in the existing duties on passenger automobiles, trucks, motors, automobile accessories and equipment would be most advantageous to exporters and consumers alike. I understand that American manufacturers would derive the greatest benefits from such a tariff reduction, although the French Citröen Company and the Swedish Volvo Company also would gain considerable advantages therefrom.
The local dealers who have conferred with our Consul General are of the opinion that the increase in imports of passenger cars would not exceed 25 per cent, as a result of the above tariff reduction, but that there would be a much greater increase in the imports of accessories, due to the relatively large number of second-hand American passenger cars which were imported during the years when the dollar was quoted at from Kroner 5 to Kroner 6. I believe that the importation of second-hand cars is now largely discontinued.
I have been given officially to understand that the Norwegian Government is determined to check the present inclination on the part of the people to invest heavily in passenger automobiles.
At the same time I have been assured that the Government has no intention of discriminating against American motor vehicles, or of obstructing importations which do not exceed a reasonable quantity to be determined by an estimate of annual requirements for replacement purposes based on the total number of cars now employed in Norway.
I would suggest, then, that the Department’s committee endeavor to arrange (1) for a reduction of approximately 50 per cent in the Norwegian duties on passenger automobiles and trucks, and a comparatively smaller reduction on motors, automobile accessories and equipment; (2) for the removal of all restrictions upon such importations and the assurance of fair and open competition among foreign manufacturers; and (3), in the event that the Norwegian Government should decide, nevertheless, to subject this trade to the principle of quota allotments based on the average of importations from the various interested countries, that positive guarantee be obtained from it that such averages will be calculated from statistics compiled from the returns of importations of motor vehicles by their trade names and [Page 666] countries of origin, and not merely as importations from the country in which is situated the port of direct shipment to Norway.
Apples and Pears.
The Norwegian duty on apples and pears amounts to Kr.0.72 per kilogram from August 1, to January 31, and Kr.0.36 per kilogram from February 1, to July 31. (Note. In 1933, when there was a record crop of fruit in Norway, the high duty period was prolonged by the Storting to February 18, for the protection of the domestic fruit.
The climate of Norway is not adapted to the extensive cultivation of apples and pears. A good crop of apples is rarely produced oftener than once in five years in this country.
This excessive duty has the effect of reducing the importation of American apples to a minimum during the height of the season in the United States. At the same time it affords a distinct advantage to apples produced in Australia and South Africa where the seasons are the opposite to those of the United States.
The fruit from the antipodes has begun to appear in the Norwegian market during the early part of March direct from the orchards, whereas the American apples must be held in storage several months before sale.
It may be of interest here to note that the duty on apples in Denmark amounts to but Kr.0.05 per kilogram and in Sweden to Kr.0.20 per kilogram during the Swedish apple season, and to Kr.0.10 during the rest of the year.
In 1933, American apple exporters controlled but 50 percent of the Norwegian foreign market, whereas in the previous three years they averaged slightly over 65 per cent of the total of importations.
In his report to me the Consul General in Oslo remarks upon the great contrast to the high duty on apples and pears as compared with the nominal duty of Kr.0.02 per kilogram on citrus fruit.
The Norwegian citrus fruit market is largely controlled by exporters in Palestine and in Spain. Only a small quantity of California and Florida grape fruit and oranges is imported, after the Jaffa and Spanish crops are exhausted.
The Consul General is of the opinion that the Norwegian fruit growing industry would not be greatly affected by a drastic reduction in the existing duties, although as a result of this protection they now obtain excessive prices for indifferent fruit. The result is that the Norwegian public now consumes about three times as many Jaffa and Spanish oranges as would be the case if American apples were available. The present exorbitant rate of Kr.0.72 renders it possible for only the wealthier classes here to purchase American apples, which are regarded as a luxury in Norway.[Page 667]
In consideration of the above, I strongly recommend the making of every effort to bring about a reduction of at least 50% in the existing Norwegian duty on apples and pears.
With regard to this commodity the Consul General in Oslo reports as follows: “A duty of Kr.1.08 per kilogram is collected on canned fruits and vegetables. The exports of canned fruits from the United States have declined steadily during the past decade on account of these exorbitant duties, which amount to considerably more than the actual cost of the goods themselves. It is believed that if these duties could be reduced to 50 per cent of the present rates, the imports from the United States could be greatly increased. At the present time 75 per cent of the canned goods imported in Norway are shipped from the United States.”
It would seem that the Norwegian duty of 18% ad valorem is higher than necessary in this category. Should a reduction be effected, the importation of American typewriters, adding machines, steel furniture and filing equipment would benefit to a very considerable extent. There is no competition with Norwegian products here. American manufacturers have controlled approximately 65 per cent of the Norwegian market for office equipment during the past four years and, owing to the recognized superiority of the American products, European manufacturers have been unable to offer very serious competition.
Oregon Pine Plywood.
As mentioned above, the Norwegian Government has prohibited the importation of this American product. The probable reason back of this prohibition is the desire to protect the interest of Norwegian manufacturers.
Some two years ago this Legation ascertained that import licenses had been granted by the Government to Norwegian importers of Finnish and German plywood. At the same time applications for such licenses to import Oregon plywood had been refused. As a result of the Legation’s representations licenses have been granted for small quantities only of the American product. The Legation has been reliably informed that owing to the quality of the wood (which does not seem to be obtainable in Norway), the great superiority of the manufacturing process, and its reasonable price, Oregon plywood is in very great demand here, as elsewhere in Europe, for certain finer classes of building work. Very large quantities of Norwegian plywood are consumed here for ordinary work and, I believe, that the importation of the American product would not interfere to any great degree with this domestic trade.[Page 668]
I am under the impression that an agreement which would cause the Norwegian Government to rescind its prohibition and which would assure the unrestricted importation of Oregon pine veneer into this country would prove of very considerable advantage to American exporters of this product, and to the Norwegian importers as well.
I am informed that the existing Norwegian duty on cotton (unstarched) shirts, cotton overalls, cotton gloves (for workers’ and machinists’ use), etc., is an unreasonable one. It appears that these cheap articles have been unfairly classified under the Norwegian tariff.
I would therefore recommend that an effort be made to have the duty on these articles lowered, in the belief that such action would materially increase the trade here of the manufacturers of such cotton articles in the United States.
(c) As I have indicated above, the chief interests of Norway in its export trade with the United States are derived from its fisheries, its forests and, to a lesser degree, its mines.
From the scanty information obtainable here respecting the tariff concessions from the United States to which Norway would attach importance, I should judge that a reduction in the duty on whale oil would in all probability receive foremost consideration.
Every effort is likely to be made by Norway to obtain the consent of our Government to the admission of this product free of duty and taxes. To this end the following suggestions probably will be advanced and be supported by the manufacturers of soap in the United States. Attention probably will be called to the fact that should the present high duty on whale oil be maintained by the United States other markets for this product will be sought among the European margarine and soap factories. On account of the consequently depreciated prices for whale oil, these factories would find it more advantageous than other oils and fats—thus largely replacing the American cotton seed oil, lard, edible tallow, etc., which are now depended upon.
To avoid such a contingency, and at the same time to permit the entry of whale oil into the United States free of duty and taxes, it may be suggested by the Norwegian representatives that the oil be denatured under the supervision of the United States Customs authorities—thus eliminating it from competition with edible oils produced in the United States and at the same time placing it on a parity with other oils (palm oil, palm kernel oil, etc.) introduced into the United States for the manufacture of soap. Palm oil enters the United States free of duty and palm kernel oil, after being denatured for technical uses, is also entered without duty. As a further argument in support of their request, it is possible that the Norwegian representatives at [Page 669] the reciprocal tariff negotiations would cite the alleged purchases of American fuel oil by the Norwegian whaling fleets.
The bulk of the whale oil is delivered in continental Europe, in England, and in the United States. Whereas, in Europe, most of the whale oil is used as raw material for margarine, and a portion as raw material for the manufacture of soap, in the United States its use is practically devoted to the latter purpose. In the United States it is first refined, and the refined product employed to supplement other supplies of fats and oils in the process of soap manufacture.
The most important consumer of whale oil abroad, in the past, has been the British firm “Unilever”, which has used the oil in its factories in England, on the continent and in Norway.
The only buyer of any importance in the United States is understood to have been the Procter and Gamble Company.
The above suggestions as to the probable Norwegian attitude in the matter of whale oil have been drawn from a report by our Consul in Bergen. I have been confidentially informed that the Consul has been advised by the representative of Procter and Gamble Company in Bergen respecting the whale oil situation.
This report also states that the Norwegian whaling industry takes the position that the new tax imposed upon whale oil by the Revenue Act of May, 1934, violates Article 8 of the Treaty of June 5, 1928, between the United States and Norway.
The Norwegian sardine canning industry, inclusive of packing employees and fishermen, supports, perhaps, a larger number of families than does any other one industry in the country. This constitutes one of the chief items of export to the United States. As the United States provides the largest market for this product, it is probable that an effort will be made to have the duty on it lowered. I understand that Norwegian canners and exporters of sardines feel that an eventual reduction in our duty of at least 50% would greatly improve their chances to regain the ground lost in recent years by Norwegian sardines in the American market.
I am informed that the importers of round, or Italian, and split stockfish are very desirous of obtaining a reduction in the duty now in force in the United States. This it is thought would offset the gradual decline in the American demand in recent years.
It is said that Bergen exporters are planning a campaign of advertising propaganda in the United States in favor of increased consumption of stockfish and that they will ultimately endeavor to oblige the Norwegian Government to assist them in their demand for a reduction of duty.[Page 670]
The Consul in Bergen suggests that this item may probably have a certain bargaining value in the prospective trade negotiations. In this connection, his report explains that the market for stockfish in the United States is largely dependent upon the Italian and Norwegian immigrant classes, which are decreasing rapidly. Moreover, the report suggests that American interests are not likely to fear any harmful competition in this category.
(d) I have alluded in the first pages of this despatch to Norway’s trade policy as indicated by its recent trade engagements with other countries. Rumors of additional forced clearing agreements have reached me. Certainly the renewal of such an arrangement as this with Soviet Russia has been under consideration and would be welcomed here. Under the circumstances, it is difficult to surmise the extent of free purchasing power remaining at the disposal of this Government for reciprocal concession in the negotiation of a satisfactory agreement as to mutual tariff adjustments with the United States.
Moreover, there seems reason to assume that the Norwegian departments of Treasury and Commerce are imbued with ultra-nationalistic motives in foreign trade questions, and that, where departures are made from this policy, they are ordinarily the outcome of outside pressure—economic or commercial. I do not mean to imply by this that Norway is amenable to high-handed methods, for I can cite no example of a people at once more characteristically independent and stubborn than are the Norwegians. In fact, to judge from opinions expressed by several of my European colleagues, Norway has the reputation in Europe of being an exceptionally difficult country with which to negotiate reciprocal agreements on tariff and similar questions.
It will be realized, however, that, in the vortex of European international existence, a young and small nation, in order to maintain complete independence, must not only drive hard bargains but also be in a position to reciprocate past favors or even goodwill on the part of powerful neighbors.
It is my conception that the powerful neighbors in the case are never backward in claiming recognition for assistance rendered in the past and that this usually implies demands for trade openings in the market of the smaller nation. Norway, in my opinion, is to a certain extent in such a position. It is obliged to dispose of its surplus products, which in the main are not greatly required in the United States, and is obliged also to conserve its international relations by certain trade concessions under threats of tariff exclusion. Frequent protests are made to me here by officials, from the Prime Minister down, against the vicious practice of raising tariff barriers in Europe and the desire of Norway for free trade or its equivalents. But the situation being as it is, Norway obviously must do the best it can under the circumstances.[Page 671]
Our Government is without any special assets, of which I am aware, in this game of trade inducements—even should it wish to exert pressure of this kind. It will be necessary therefore to approach the negotiations for a reciprocal tariff with complete frankness on both sides. One knows that the Norwegian Government particularly desires an open American market for whale oil free of duty and taxes, a reduction of our duties on sardines and possibly other commodities. It remains for Norway to state just what concessions to American trade it is able to make in order to achieve these ends.
I beg to state in conclusion that the published report of Norway’s trade situation for the month of September, 1934, indicates a marked increase of imports over exports. This increase is announced as being eleven and a quarter million Kroner, or a gain in imports over exports of eight and a half million Kroner from the corresponding month of September, 1933.
In the preparation of the above comments, I have relied extensively upon reports made to me by our Consul General in Oslo and the Consul at Bergen. Copies of the reports in question will be transmitted to the Department should they be required.